Administration economic officials testified yesterday that they were opposed to the employment tax credit contained in the tax bill the House will vote on next week. They also said the Ways and Means Committee made a mistake in killing the administration's proposed investment tax credit.
Administration officials have privately criticized the business portions of the Ways and Means bill, but yesterday's testimony was the sharpest criticism they have lodged against the bill publicly.
Several congressional aides said the administration might lobby for changes - either on the floor of the House next Tuesday or in the Senate when the Finance Committee takes up the tax package.
Treasury Secretary W. Michael Blumenthal said the Carter administration finds most of the tax bill "acceptable," including cutting off from a $50-a person rebate individuals in families earning more than $30,000 a year.
Testifying before the House Budget Committee on Carter's proposed budget for the fiscal year which begins Oct. 1. Office of Management and Budget director Bert Lance said businessmen have no reason to worry about inflation because of the administration's economic stimulus package.
Lance said the credit markets will have no trouble financing the federal deficit and the expected increase in private borrowing demands. He warned that businessmen who continually talk and worry about inflation could bring on an inflationary psychology needlessly.
The administration officials said the government does not need machinery whereby labor unions tell the government about wage increases in advance, but chairman of the Council of Economic Advisers Charles L. Schultze said that on the "business side we do seem to need some advance warning" of price increases.
But Schultze said that any anti-inflation program adopted by the new administration will be voluntary in nature. He noted that U.S. Steel came in to discuss an increase on tin mill products - used in making vegetable and beverage containers - before announcing it in January.
Both Schultze and Blumenthal were critical of the House for leaving the investment prod out of the tax package.
Schultze said under questioning that there is no way the administration can reach its goal of a balanced budget and full employment by 1981 unless there is a major increase in business investment.
Schultze said consumer spending has already picked up nicely as have all other economic sectors except capital spending. By removing the investment tax credit increase from the tax package, Schultze said, Congress is sending the wrong signals to the business community.
Blumenthal told budget committee that by taking one element of the Carter tax package and cutting it out, "the element that says we want you to invest, is not a desirable thing to do." He said the nation needs increased investment to boost productivity and private jobs.
"I do hope it can be restored," Blumenthal said.
Blumenthal also criticized the Ways and Means Committee employment tax credit which is designed to give employers tax breaks for increasing their hiring.
Blumenthal said the tax credit would do nothing for companies that want to boost investment, would have little employment impact because it covers too little of the labor force and would give a bonanza to self-employed persons in high tax brackets who hire persons.
Schultze also testified that while some economists had worried that the stimulus package proposed by the administration - and adopted in roughly the same dimension by Congress earlier this week - would be dissipated by the winter weather, there appears to be no reason to try to offset the effects of the cold and fuel shortages.
He conceded that higher fuel bills will drain about $2 to $3 billion from consumer pocketbooks, but he said "the effects on the economy are likely to be small and relatively shortlived . . . We see no need for an extra fiscal push from the government."